Investors say gold may hit $2,000

Investors are gearing up for another hike in the gold price as individuals rush in to stave off the rising threat of heavy inflation.

Bullion: On the up again?

Paul Tustain, of gold traders Bullion Vault, believes that private investors, are buying because they believe that, in the long term, the price of bullion reaching $2,000 is a significant possiblity.

And US investment firm, Moonraker Fund Management, say that 20 out of 22, or 91%, of hedge fund managers that it interviewed are buying gold to protect their personal wealth against excessive inflation.

Tustain says: 'Our experience right now is that, the typical private investor buying gold, does not trust any 'green shoots' of recovery.

'They believe that strong house prices and cheap credit are a thing of the past and they are not convinced by any equity market recovery, but that there is better to come from gold, even up to $2,000 an ounce.'

Moonraker found that the vast majority of those they surveyed were buying physical gold for fear that the quantitative easing programme being seen in the Anglo Saxon economies would eventually result in a bout of steep price rises.

Historically, gold is considered to be the ultimate safe haven from turbulent markets, low interest rates and the threat of inflation.

Every year since 2001, it has experienced gains. Generally speaking, during the past decade, the precious metal has tended to rise for a term of around six to nine months, and then plateau before rising again. Since the financial crisis began it has on a number of occasions hit the $1,000 mark.

Like any other commodity it can endure heavy bouts of volatility, but over the longer term the returns have been spectacular. Over five years to the end of 2008, in dollar terms, it is up by 102% and by a massive 195% over the past decade.

In April, Charles Gibson, an analyst, at Edison Investment Research, claimed that the dramatic monetary policy tactics of central banks, could even potentially, push the price of gold to more than $1,500 an ounce.

During the past 12 months its value has risen by 4% to stand today at $931 an ounce, and in just the last three months, it has surged ahead by more than 5%.

Jeremy Charlesworth, chief executive of Moonraker Fund Management believes there is more upside to come. Charlesworth, who is upping his exposure to gold in the funds he manages, says: 'Gold is the ultimate currency, performing best when economies are at extremes, whether that is inflationary or deflationary.

'The managers I met in the US know that if the politicians get the quantitative easing programme wrong then the value of money relative to real assets will dwindle. Everyone agreed that sentiment is better than it was a few months ago but none of the structural problems have yet been fixed. Double digit inflation two or three years down the line is a very real possibility.'

Tustain adds: 'Even if a recovery does sustain itself - and I don't believe it can be inflation-free - buyers of gold believe the downside in the price of bullion will be limited.'